Thursday, 9 June 2016

TRAI Rolls back 27.5% tariff hike post SC Judgement

After the TDSAT pointed out and the Supreme Court upheld the decision, the Telecom Regulator TRAI accepted that there is a healthy growth in the industry with rise in revenues outstripping the increasing inflation over the years and therefore concluded that inflation linked hike provided earlier vide Eleventh Tariff Amendment Order and thirteenth Tariff Amendment Order dated 31st March 2014 and 31st December 2014 respectively are not required at present.

Although this move to withdraw its Tariff Order allowing 27.5% hike in pay channel rates has come more than two years after issuing the order, it is a good sign for the industry. Broadcasters have kept increasing their rates arbitrarily imposing them on LCOs and MSOs every year since 1994, even though there was no justification. Since no addressability existed, there was no way to find out how much the broadcasters are earning and how much the content is costing to them.

The sad part is why the courts have to tell the Regulator that what it has done is wrong. Why the Regulator could not find the basis of Pay TV rates and workout a viable formula? Why the government could not ensure that the broadcasters reveal their content costs and charge reasonable to the consumers rather than fix their rates on their whims and fancies and also force the regulator that consumers must be facilitated by the MSOs to view all their channels.

During analysis of relevant data and the impact of various factors on the issue of inflation linked hikes in tariff ceilings at the wholesale levels, the Authority observed that the annual revenues that actually accrued to the broadcasters have surpassed the estimated revenues that should have accrued to them after taking into account the year-on-year hike in inflation as calculated using the GDP deflator. The Compound Annual Growth Rate (CAGR) of the year–on-year revenues accruing to the broadcasters has also witnessed a positive growth. More importantly, this growth has kept well ahead of the estimated revenues compensated for the year-on-year change in the inflation as computed using the GDP deflator.

This analysis was carried out pursuant to the observation of the Hon’ble Supreme Court in its final orders while upholding the order of the Hon’ble TDSAT. The matter was examined afresh by TRAI taking into account the GDP deflator as a measure of the inflation. Other associated factors like increase in the number of subscribers and also the increase in total revenues accrued to the broadcasters were studied to carry out a detailed and holistic analysis of the issues at hand.

These tariff amendment orders were set–aside by the Hon’ble TDSAT vide its judgment in Appeal Nos 1 ( C ) to 6 (C) of 2014 dated 28th April 2015 and TRAI was directed to re-consider the issue in light of the observations made in orders.

Submissions of one of the appellants in this regard was as follows:-

“These negotiations take into account all aspects including growth in subscribers, inflation, etc. Each year the subscription charge goes up and the subscription revenues have increased by 130% as against the growth in subscriber of 34%. Yet these aspects have not been taken into account by the TRAI.”

Further, Hon’ble TDSAT observed that TRAI should consider other inflation indices such as GDP deflator in the calculation of inflation linked hikes. The relevant observations of Hon’ble TDSAT are as under:-

(a) There are a few questions to which we do not find any satisfactory answers. The first is with regard to WPI and how the same has been applied to give the inflationary hikes.(b) It may identify the major cost components so that increase or decrease in such costs may be suitably factored while working out the inflationary hikes. Increase in costs of such components as may be available in indexes such as WPI, GDP deflator etc. can then be applied.

Thereafter Civil Appeal No. (S). 5159-5164/2015 were filed by Indian Broadcasting Foundation (IBF) and another in the Hon’ble Supreme Court against the said order of the Hon’ble TDSAT. The Hon’ble Supreme Court on 04 August 2015 upheld the order of the Hon’ble TDSAT and also directed TRAI to re-consider the hike in the light of observations made in the order of the Hon’ble TDSAT and pass an order afresh.

Already many broadcasters had increased their rates according to the Tariff Orders and now TRAI’d next task is to ensure that they lower the rates to the earlier level so that consumers benefit.